Andy Gulliford is the chief operating officer of warehouse provider SEGRO.
andy gulliford segro
The phenomenon of ecommerce is nowhere more evident than in fashion retailing. And retailers involved in the sector are having a profound effect, not just on the high street, but on the wider logistics supply chain.
According to commercial property agency CBRE’s July 2017 UK Market Shapshot, online retailers accounted for 33% of warehouse leasing in the first half of the year, which is more than double the 2015 rate and six times the rate of take-up in the first half of 2014.
With food retailers not included in this number, fashion retailers will account for a significant proportion of this surge due to the increased consumer demand for same-day or next-day delivery, with extra warehouse space needed to fulfil online sales.
Across Europe the trend is the same, from Missguided opening a 1m sq ft distribution centre in Manchester, to Zalando opening new fulfilment centres in Poland and Italy and Yoox Net-a-Porter combining the logistics support for the merged entity in Milan and Bologna, with SEGRO.
The UK’s Midlands ‘golden triangle’, with its rapid travel time to the vast majority of the country’s population is booming as well. H&M and TK Maxx have both recently expanded into a SEGRO distribution centre at Rugby.
Returns are possibly the biggest issue facing any fashion retailer
Consumer demands are driving this growth, with online shoppers increasingly wanting to `buy now and wear now’. According to future commerce consultancy Salmon, 60% of shoppers now think all online retailers should offer same-day delivery, compared with last year’s expected delivery time of 2.6 days.
Salmon also recently reported that 88% of UK customers say that speed of delivery is more important to them than the brand being ordered. So, by extension, if retailers don’t have a warehouse network which can fulfil that need they will surely lose sales.
But, to the greatest challenge of all: on average 40% of online purchases will be sent straight back. How can fashion retailers balance their need to expand online with the complexity and cost of returns to the warehouses they lease?
This is a question exercising many minds in the fashion retail and property worlds.
The next step will be collaboration between retailers, creating shared returns handling centres
With shoppers in Britain generally returning 7% of purchases from high street stores, the issue of returns has been an irritant rather than a game-changer. But with such a high percentage of online purchases coming back to warehouses the extra space and processes needed to handle them becomes a thorny issue.
Retail warehousing floor space - historical data
For fashion retail the ‘returns nightmare’ is even more vivid. A garment, on sale at full price in early summer, can quickly turn into Sale stock as the season changes without having been further than one person’s home – and back.
Once again, speed is clearly the issue. The default position is to create a separate area, frequently at mezzanine level, within the warehouse specifically tailored to returns.
This enables the necessary human intervention to undertake the more complex task of sorting returns without ‘contaminating’ the normal processes of inbound, picking and dispatch (which are all increasingly automated) taking place on the level below.
More significantly, we are seeing the growth of dedicated return centres run by specialist logistics groups for retailer clients as consumers demand not just a speedy delivery but the opportunity to quickly return products and get their money back too.
But will this be enough to solve the returns conundrum, which according to consultancy Clear Returns is costing UK retail overall £60bn a year, with £20bn a year of this accounted for by purchases made online. In fact, the average returned product passes through seven pairs of hands before it is ready to be sold again.
At SEGRO we believe the next step will be collaboration between retailers, creating shared returns handling centres. Why should returns be seen as a competitive business when the products involved have already been sold?
And the step after that? Dedicated, shared local returns centres on the edge of every major town, to ensure goods can be sent back and re-appear in shops or on websites without having to travel through a warehouse in the centre of the country every time.
Returns are possibly the biggest issue facing any fashion retailer. We’re keen to find solutions to make the most of both in-store and online retailing.